Letter IEDI n. 1165—Between highs and lows
At the transition to the second half of the year, the Brazilian industry started a trajectory of oscillation without output expansion as the final result. It's like it has not moved since the end of the first quarter of the year. In relation to 2021, however, the bases of comparison help and there has been some easing of the situation.
In Jul'22 and Aug'22, the general industry registered +0.6% and -0.6%, respectively, in the seasonally adjusted series, but its fluctuation was conditioned by a smaller number of branches than in the previous two-month period. In Jul'22, the increase in production was driven by 9 of the 26 branches identified by the IBGE and in Aug'22 the decline was due to 8 of these branches.
The most intense falls in the latter (the most recent month with official data) were due to textiles (-4.6% versus Jul'22), coke, petroleum products and biofuels (-4.2%), the extractive sector (-3.6%) and food (-2.6%). Thus, the two macro-sectors that led the decline in Aug'22 were intermediate goods and semi-durable and non-durable consumer goods, with -1.4% in both cases.
Durable consumer goods (+6.1%, with seasonal adjustment), which were the best performing sector in Aug'22, are also in a seesaw movement in recent months. Capital goods, in turn, after two consecutive contractions, saw output rise again (+5.2%), but still fell short of the level of May'22.
Despite the recent hesitation, CNI indicators point to an increase in inventories, which reached levels above those planned by companies both in Jul'22 and in Aug'22. This behavior signals limited results for industrial production in the coming months.
In contrast, the improvement in the labor market and the set of countercyclical measures that the government has been adopting to support household consumption, including the increase in the amount paid by the Auxílio Brasil Program, open the possibility of a reinforcement in industrial performance over the last four months of the year.
Perhaps for this reason, as well as the prospect of the end of the electoral period, the confidence of industrial entrepreneurs has been steady or even advanced in recent months, according to some indicators. In Sep'22, the CNI index exceeded 60 points, something that had not occurred since the middle of last year, while the FGV index has been oscillating very close to the level of equilibrium.
The fact that the bases of comparison help obtaining positive rates is also an important factor for the improvement in the industrial situation in 2022, whose result in Jan–Aug'22 remained negative, nonetheless: -1.3% compared to Jan–Aug'21. In the two-month period Jul–Aug'22, however, there was an expansion of +1.2% due to the month of August, which was also helped by a higher number of working days in relation to Aug'21.
To date, all industrial macro-sectors are in the red in 2022. Durable consumer goods concentrate a lot of the decrease in the year: -7.2% compared to Jan–Aug'21, but with good signaling in the two-month period Jul–Aug'22 (+7.0%), due to the increase in vehicle production in August (+19.3% versus Aug'21).
For capital goods, responsible for the second largest drop in Jan–Aug'22 (-1.2%), the last two months did not bring much improvement: there was a decrease of 1.2% in Jul–Aug'22, even though the sector did well in Aug'22 (+4.0% against Aug'21).
Intermediate goods and semi-durable and non-durable consumer goods, in turn, registered -1.1% and -0.6% in the year, respectively, with a favorable sign in Jul–Aug'22 (+1.2% and +1.0%, respectively).